News
Australian government underwrites minimum domestic network
April 17th 2020
The Australian government has pledged to spend up to A$165 million (US$105 million) to underwrite domestic services to be operated by Qantas and Virgin Australia in the next eight weeks. Read More »
Under the scheme, announced on April 16, Qantas and its LCC, Jetstar, will fly a combined 164 passenger flights a week to all Australian state and territory capitals and to 36 regional destinations. A combined group fleet of A320s, A330s, 737 jets and Dash 8 turboprops will be deployed to provide the service.
Rival Virgin Australia (VA) said it planned to operate 64 return services a week to 17 destinations from today to June 7.
Australia's Deputy Prime Minister and Minister for Infrastructure, Transport and Regional Development, Michael McCormack, said the minimum domestic network would maintain airline connectivity during the coronavirus pandemic.
"We are ensuring secure and affordable access for passengers who need to travel, including our essential workers such as frontline medical personnel and defence personnel, as well as supporting the movement of critical medicine and personal protective equipment," McCormack said in a statement.
"This investment will help Australians returning from overseas, who now find themselves in a different city after 14 days of mandatory quarantine, to complete their journey home safely."
The government would continue to monitor the market and determine if more action was required, McCormack said.
Before the government announced its decision to underwrite some domestic airline services, VA had reduced its network to six return services a week between Melbourne and Sydney.
Qantas and Jetstar were flying around the country with three aircraft, as the restrictions on the movement of people introduced by various state and territory governments had evaporated demand for air travel.
The resumption of some domestic flights would allow both airlines, which have cancelled all scheduled international passenger services, to reinstate some of the staff stood down as part of efforts to preserve cash at the carriers.
Establishment of a government supported minimum domestic network was announced as VA continued its search for new sources of capital and to refinance some A$5 billion in debt on its balance sheet.
The company requested its shares be placed in a trading halt on April 14. On April 16, it requested an extension of the trading halt for another seven days as it continued discussions "with respect to financial assistance and restructuring alternatives".
Media has reported VA has opened a data room for prospective investors and appointed a couple of investment banks to assist in the search for fresh equity. It also has engaged an advisory firm for advice on its debt restructuring.
In recent weeks, VA has sought A$1.4 billion in government backed support, but the response to the airline group’s overtures from the corridors of power in Canberra has been lukewarm. Australia’s Prime Minister, Scott Morrison, said the government was "not going to get in the way of a market commercial solution".
"There are many things going on there," Morrison told the Australian Broadcasting Corporation's (ABC) 7.30 Report on April 16. We are going to make sure anything we do in this space, like it has been in other countries, would be done on a sector-wide basis.
"We have some clear principles here, but what is very important is we don't get in the way of a commercial solution."
